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Markham Company makes two products: Basic Product and Deluxe Product. Annual production and sales are...

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Accounting

Markham Company makes two products: Basic Product and Deluxe Product. Annual production and sales are 2,000 units of Basic Product and 1,400 units of Deluxe Product. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Basic Product requires 0.4 direct labor hours per unit and Deluxe Product requires 0.8 direct labor hours per unit. The total estimated overhead for next period is $99,285.

The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost poolsActivity 1, Activity 2, and General Factorywith estimated overhead costs and expected activity as follows:

EstimatedExpected ActivityActivity Cost PoolOverhead CostsBasic ProductDeluxe ProductTotalActivity 1$30,6481,4007002,100Activity 217,5352,0003002,300General Factory51,1028001,1201,920Total$99,285

(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor hours.)

The overhead cost per unit of Deluxe Product under the activity-based costing system is closest to:

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